Mercer has launched a cost monitoring service for foreign exchange (FX) transactions in response to the lack of transparency and control over FX markets.
The new service is designed to make institutional investors more aware of the costs of FX and reflects the growing interest that investors have been paying to FX execution costs following lawsuits against a number of institutions alleged to have applied uncompetitive foreign exchange rates, Mercer stated.
As part of the service, pension funds and other institutional investors can request a review of all spot and forward FX transactions at multiple trading locations in order for them to determine the competiveness of FX costs.
Mercer Sentinel Asia Pacific director Lounarda David said the cost monitor provides information on the sources of excess costs, recommends ways to address these costs, and advice on how to structure FX arrangements over the long-term.
Institutional investors are more attentive to sources of performance leakage, partly because in recent times funds and managers have been at risk of incurring significant excess FX transaction costs, David said.
"The market is becoming aware that if there is no transparency, the risk of paying too much is high and this can impact fund performance," she said.
